• Ruble volumes surged in March, but not to a level that causes alarm
  • Binance, which has the bulk of the ruble trading volumes, has taken steps to comply with sanctions requirements

Two months since Russia’s invasion of Ukraine provoked unprecedented international sanctions, regulators remain concerned that crypto could offer a financial loophole for Russians. In the European Union, officials are confident that no relevant evasion is occurring following an agreement between countries to clarify that cryptoassets are under the scope of sanctions.

“We are currently examining whether cryptoassets could be used by Russia to circumvent any other measure we have introduced,” a European Commission spokesperson told Blockworks. “Our feedback from the markets is that there is broad awareness” that crypto is fully covered by EU sanctions. 

“What is important now is to continue and intensify enforcement work. In this context, we will continue to constantly monitor the market situation.”

The major concern is whether capital outflows from Russia through crypto markets might jeopardize the sanctions’ effects on its economy. If there are any indications of non-compliance, the EU’s executive arm stands “ready to adopt additional measures to limit any circumvention risks.”

At this stage, EU officials believe that market information doesn’t indicate that crypto has been used to circumvent sanctions on a large scale, Blockworks has learned. Data from CryptoCompare, a British cryptocurrency market data provider, suggests that ruble trading volumes on crypto markets spiked in March, but sank thus far in April.

Rubles predominantly trade against the USDT stablecoin, followed by bitcoin and other cryptocurrencies. When the ruble was losing value, the volume could have been affected, because Russians needed more rubles to buy the same amount of crypto than before the war.

The ruble’s value has recovered over the past month — particularly against the euro — as Europe grapples with Russia’s demand for natural gas deliveries to be paid in rubles rather than euros.

“In February, USDT volume dominance grew from 20.3% to 27.4% and then to 59.9% in March. This could indicate that traders were using crypto as a way to flee ruble exposure as the currency fell,” research and data analyst from CryptoCompare James Webb said. “It will be interesting to see if future geopolitical tensions lead to upticks in fiat/stablecoin pair volumes as the market matures, and investors seek to minimize this inherent risk.”

Not all observers agree that crypto is benign when it comes to effective sanctions. In an analysis seen by Blockworks, Ukrainian crypto startup Global Ledger Protocol, which focus on anti-money laundering (AML) risk assessment in digital assets, describes a model of how Russians may be able to avoid sanctions through over the counter brokers and exchanges. But it isn’t clear if wealthy oligarchs could make use of crypto rails given modest transaction limits imposed by crypto-fiat on-ramps.

Governments and regulators offer few details on crypto sanctions

In the EU, sanctions are enforced directly by its 27 member nations, but authorities have their hands tied due to a lack of legislation, which is still being discussed between the European Parliament and the Council of the EU, the governing body’s legislative branch. Blockworks contacted governments and central banks in the EU’s biggest economies — Germany, France, Italy and Spain — but none revealed details of their crypto sanctions efforts. 

The French government, which is at the helm of the EU Council through June, said it is “implementing the sanctions against Russia on all types of transferable securities, including cryptoassets.”

“The aim of the EU decision is to make sure these sanctions are implemented in a unified manner,” the French Ministry of Economy, Finance and the Recovery said. 

The European Central Bank (ECB) said it only assesses the prudential implications of sanctions regimes by checking if European banks have the necessary arrangements to adhere to the sanctions in place. In March, ECB’s president Christine Lagarde warned that cryptoassets “are certainly being used, as we speak, as a way to try to circumvent the sanctions.”

ECB board member Fabio Panetta reiterated the point in a speech Monday that was broadly critical of the growth in digital assets.

The Bank of Italy said there was no official data regarding crypto sanctions, and the Bank of Spain disclaimed responsibility for sanctions enforcement.

The German Bundesbank told Blockworks that “prohibitions like the ones relating to cryptoassets are directly applicable” and that “violations of related prohibitions could be prosecuted as criminal or regulatory offenses.” The German central bank revealed that it took part in a survey by the European Banking Authority (EBA) on cryptoassets and sanctions, but the results are not yet public.

“Consistent with its convergence mandate, the EBA has been collating questions from industry and national authorities regarding questions about the EU’s sanctions regime and forwarding these to the European Commission,” EBA told Blockworks.

Binance appoints global head of sanctions and applies limits to Russian wallets 

Last week, Binance, the exchange most widely used by ruble holders with over 50% market share, created a new global head of sanctions position and began restricting service to high-volume Russian users.

Unlike Coinbase, a US-based custodian that froze 25,000 Russian wallets, the biggest crypto exchanges in Europe contacted by Blockworks declined to disclose any figures. 

“eToro always complies fully with all applicable rules and regulations, which includes sanctions, and it will continue to do so,” the company said.

A Crypto.com spokesperson said the company is “aware of and in compliance with all applicable sanctions requirements.”

Binance CEO Changpeng “CZ” Zhao had previously assured that the company had a compliance task force with “world-renowned sanctions and law enforcement experts,” and he denied the idea that crypto is a feasible option to outmaneuver the West’s financial punishment.

“We are meeting sanction requirements, and crypto is not useful to avoid sanctions,” he said in a blog post.


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  • Blockworks
    Freelance Reporter
    Tiago Varzim is a journalist based in Portugal covering macroeconomics, financial markets and digital assets in the European Union. He works for key financial newspapers in Portugal. Tiago graduated from Escola Superior de Comunicação Social in Lisbon with a degree in journalism.